Electric vehicles are coming but at what cost?
“We believe we can get cobalt to almost nothing”, Elon Musk stated. He is a great visionary, but as a CEO he still worries what investors think. Electric vehicles are coming and battery metals are becoming extremely expensive as a result.
Watching the Formula E in Zurich over the weekend bought the scale of this revolution sharply into focus for me. The technology on display during this brutal action-packed race was mind-blowing. It made Formula 1 look pretty mundane.
Reigning champion, Audi’s Lucas di Grassi, rose aggressively from fifth on the grid to win his first Formula E of the season. I watched in shock as Mahindra’s racing driver Felix Rosenqvist ploughed into a wall, unable to thwart an attack by TECHEETAH’s Jean-Eric Vergne. Yellow flag penalties added to the tension as numerous drivers were penalised for speeding while debris was being cleared off the track.
I think the carnage is set to continue. As I said in my last post “Tesla is not the story”. Dare I say also that “cobalt is not the only story”. This supply deficit is being felt across all battery metals, including manganese, molybdenum, graphite and lithium. Everything is going to rise in price. Just look at the chart below!
Auto manufacturer know the future is electric. Therefore, getting a sustainable and reliable supply of battery metals is crucial to their survival. One great example is Volkswagen, which is the world’s largest car manufacturer by vehicles produced. It recently bought USD 48 billion of battery materials, which is almost the entire market cap of Tesla. It’s a great demonstration of how serious the electric vehicle market has become.
I’m worried though. Feeding the demands of the auto industry requires significant investment. A decline in ore grades and a lack of investment in battery metal projects, could choke off progress. Significant new-mine investment will be needed, while spending on exploration and development will need to be ramped up.
At stake for Blackstone Resources is our vision. We want to see a cleaner and more energy renewable world. The World Health Organisation estimates that every year 7 million people die globally from respiratory diseases linked to pollution. That’s far too much.
That’s why governments around the world are taking air pollution very seriously. Many have already signed aggressive emission targets. Electrifying their road networks could literally save lives.
China, which now has the largest car market in the world, has the most to lose if it doesn’t take action. Over two million people are year are dying already.
It has already announced intentions to electrify its entire road network, independent of what other nations do. It has the largest number of charging poles and stations in the world with 190,000. This dwarfs what the US has with only 44,000 charging outlets and 16,000 charging stations.
However, the country’s planners are already experiencing range anxiety. It will need to install millions of public charging stations to help increase consumer appetite enough to fully electrify its road network.
The plan is to install 4.8 million charge stations by 2020, which will require a huge investment. According to analysts at Ping An Securities, it will require USD 19 billion, which is roughly the GDP of Cyprus.
However, this is a small price to pay and I’m pretty sure China will succeed.
Clean air is very personal to me. Many of our pristine alpine ski resorts here in Switzerland are car free. Zermatt, which lies at the foot of the magnificent Matterhorn mountain is a great example. The town is serviced by electric vehicles. If this wasn’t the case, our iconic Matterhorn mountain – the picture on the Toblerone chocolate bar – would disappear under a layer of smog.
Of course, achieving this dream has a cost. Mining has a carbon footprint, even for the battery metals that will help power our green electric cars. When you look at the emissions of an electric vehicle over its life cycle, you also need to think about the emissions incurred across the supply chain.
In other words, fossil fuels were most likely burned during the production process of electric cars and they are almost certainly used to generate the power to charge these cars. Researchers have found that an electric vehicle produces half the emissions of a conventional combustion engine car, which in my opinion is far too high. Plus, there are the pollution costs involved in extracting battery metals in an inefficient and unethical way.
Here’s what I believe. Battery metals will make renewable energy sustainable. They will provide reservoirs of green energy that will power our planet even when the sun doesn’t shine and the wind doesn’t blow. If we achieve this result, the carbon emissions of an electric vehicle over its lifetime will plummet.
However, none of this will happen without significant investment. Tesla and Apple have already stated that they will only use ethical battery metals in their products going forward. Therefore, this investment is coming. New investment will also make mining battery metals cleaner, greener and more efficient.
I think the only cost to us at the dawn of the electric vehicle era is not to act at all. It’s time to invest!